A smart electric grid incorporating local generation and storage is an area of active research in the industrial automation community. Very little attention has been given to similar possibilities in hot water grids that are used extensively for district heating in several countries, especially in Central and Northern Europe. In this paper, possibilities for heat trade in such a grid are investigated through simulation, considering the thermo-hydraulic properties of such a grid. For the distributed automation of several independent producer-consumers, an event based IEC 61499 solution is presented. The paper proposes a co-simulation environment for a dynamic process simulator and an event based control system, which is applied to the district heating case.